Journal of Applied Finance & Banking

Do the Capital Requirements Affect the Effectiveness of Monetary Policy from the Credit Channel?

  • Pdf Icon [ Download ]
  • Times downloaded: 8958
  • Abstract 
    This paper examines weather the capital requirements affect the effectiveness of monetary policy from the credit channel. According to the penal data of commercial banks listed on the A-share stock market in China from 2007 to 2017, I find that the capital requirements to the commercial banks affect the bank loans through the credit channel of monetary policy transmission, which is more obviously on the smaller banks. I further use issuance of preferred stocks of commercial banks instead of IPO to confirm the results again. Moreover, I compare the two kinds of monetary policy instruments in my results, which document that the price-based monetary policy instruments are more sensitive than the quantitative ones. 
    Keywords: Credit channel, monetary policy, transmission channel of monetary policy, capital adequacy ratios (CAR), preferred stocks.